Credit Unions Win Victory in FOM Legal Challenge

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Today, the U.S. Court of Appeals for the D.C. Circuit issued an opinion upholding almost all portions of the National Credit Union Administration's (NCUA) field of membership (FOM) rule.

The American Bankers Association (ABA) had challenged NCUA over chartering and FOM rule changes adopted by the NCUA Board in October 2016 and published Dec. 7, 2016, in the Federal Register.

In March 2018, the U.S. District Court for the District of Columbia found in favor of the ABA on two of the four issues in the case and for NCUA on the other two issues. The NCUA appealed the portion of the ruling that found in favor of the ABA.

In a unanimous decision, the circuit court today overturned the lower court’s ruling on the two relevant issues:

  • Population Limit of 2.5 Million: The FOM Rule automatically qualifies any contiguous portion of a Combined Statistical Area as part of a single local community, if the portion’s population does not exceed 2.5 million.
  • Definition of Rural District: The FOM Rule increases the population limit for rural districts from 250,000 (or 3 percent of the relevant state) to one million. The FOM Rule also maintains a rurality requirement that either 1) most of the area’s population resides in rural areas (as defined by government agencies), or 2) the area’s population density does not exceed 100 persons per square mile.

In today’s ruling, the circuit court also considered the ABA’s cross-appeal on those portions of the district court’s ruling that favored the NCUA. On the cross-appeal, the circuit court took issue with the provision of the FOM Rule that eliminates the requirement that a Core-Based Statistical Area must include the core.

The district court had previously found that NCUA’s decision to eliminate the core requirement was not arbitrary and capricious. However, in today’s opinion, the D.C. Circuit Court said NCUA may have gone too far in determining that credit unions could exclude large population areas and wants the regulator to have a chance to defend that part of the rule at the lower court level.

While remanding that part of the rule back to the district court, the D.C. Circuit said putting a hold on the rule while that portion was adjudicated could “make it more difficult for some poor and minority suburban residents to receive adequate financial services.”

The California and Nevada Credit Union Leagues and the Credit Union National Association (CUNA) fully supported NCUA in its appeal and welcome the positive outcome. The FOM rule will increase consumer access to credit unions and the benefits of credit union membership.

“The NCUA is pleased with today’s Court of Appeals decision," said NCUA Board Chairman Rodney Hood. "The agency is still reviewing that decision. In the near future, we will provide guidance for affected credit unions.”


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